In the journey of financial understanding, it’s essential to recognise the concept of the income cliff and its implications on our lives. This concept revolves around the income cycle, peak earning capacity, and the choices we make during these phases.
The Income Cycle in Australia
The average full-time income in Australia is around $1,312 per fortnight before tax, amounting to approximately $68,818 annually. This translates to roughly $35 per hour. Understanding where your income stands in relation to the national average is crucial in contextualizing your financial situation.
A high income in Australia is considered to be about $200,000 per year, a bracket in which only about 2% of Australians fall. This places a significant perspective on the general earning capacity within the country.
The best paying industries in Australia currently include Mining ($135k), Electricity, Gas, Water ($100k), Construction ($81k), Wholesale Trade ($69k), and Manufacturing ($69k).
Income Variations by Age
Income changes with age and is impacted by factors like experience and value to employers. For instance, under 20s earn around $383 weekly, mostly due to part-time or casual employment. As people age, their income typically increases, peaking around the age of 45-54 at about $1,544 fortnightly.
During peak earning periods, individuals often play one of two games: the Comfort game or the Wealth game. The Comfort game involves securing basic financial needs and enjoying current earnings without much future planning. In contrast, the Wealth game focuses on saving and investing in assets that generate further income. This is all about securing financial stability for the future.
The TMAP Way: Wealth
The choice between the Comfort and Wealth games is critical. Most Australians end up relying on a pension and income significantly decreasing after retirement. The key to avoiding a precarious financial situation in the future is to understand and prepare for this phase. How? By making smart financial decisions during peak earning years.
The TMAP approach advocates for playing the Wealth game; invest in assets that not only grow in value but also generate income. This strategy aims to ensure a steady income stream even when your regular earnings start to decline and you hit the income cliff.
